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David Ripplinger, NDSU Department of Agribusiness and Applied Economics, Published July 09 2013

Renewable accounts: Climate change plans important to North Dakota

On June 25, President Obama laid out his second-term plans to address climate change. It was the first major speech on the issue by a sitting president.

The administration's plans are important to North Dakota, its businesses and residents because of the size of our energy and agricultural sectors and the energy budgets in many businesses and households.

The impact of the speech and federal and state energy policies, in general, is greater on bioenergy than many others. Beyond the tremendous volatility in agricultural markets, policy uncertainty makes planning new bio-based projects more difficult to develop, investments more difficult to value, and decisions more difficult to make.

Given a lack of popular and political consensus on the existence and importance of climate change, the speech was dominated by announcements of executive actions that are possible under existing law. Regulation, as opposed to legislation, likely is the only way to make any significant changes because of the political disagreements on energy and climate change.

Among the biggest announcements was that the Environmental Protection Agency will be directed to develop and oversee carbon emission standards for power plants. Although there was little detail on what these standards would look like, this may be very bad news for the coal industry because it releases more carbon per megawatt than natural gas.

However, a new carbon emissions standard might provide a secondary benefit to North Dakota's energy industry because there would be a possible incentive to sequester carbon dioxide from coal power plants to increase the efficiency of oil recovery from shale.

President Obama did voice his support for the Renewable Fuel Standard (RFS), which is a 2007 law that mandates the increasing use of biofuels through 2022 The RFS has been under significant fire by blenders, who have noted that mandated levels exceed expected demand and the nation's vehicle fleet capacity to use it. This "blend wall" issue likely will remain heated as blenders resist requirements to blend fuel that consumers currently don't want or can't use.

Support of new advanced biofuels (other than corn ethanol) also was expressed with calls to scientists to design new fuels and farmers to grow new bioenergy feedstocks. However, it is quite interesting that the speech didn't include the terms corn, ethanol or cellulose.

In the speech, the president announced that he expected a doubling of solar and wind power use by 2020. In part, this is to be achieved by opening public lands to development.

The best news of the day came for natural gas, which is seen as a low-carbon substitute for coal and a bridge to a cleaner energy future. The president spoke of the need to continue the development of the industry because of the job creation benefits it provides and lower energy bills for consumers. However, his comments have taken considerable flack for ignoring the environmental impacts of fracking.

The president clearly outlined his vision for addressing energy and climate

change. This is helpful to the bioenergy and bioproducts sector because much of the uncertainty that existed on the president's position was erased.

What's unfortunate is the large divide on energy and climate change that remains between 1600 Pennsylvania Ave. and Capitol Hill. New regulations will address some pressing issues but does not build the consensus needed for a comprehensive, integrated national energy policy.

Ripplinger is a bioproducts and bioenergy economist and assistant professor with the NDSU Department of Agribusiness and Applied Economics.